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Technology Stocks : WCOM -- Ignore unavailable to you. Want to Upgrade?

To: JDN who wrote (6039)	3/27/2000 1:27:00 PM
From: JDN	Read Replies (3) \| Respond to of 11568

To all: This article may explain the weakness in WCOM lately. After reading it, I think I am hoping more then ever for the Sprint deal to go through. JDN Region of the Day \| Sector of the Day \| Fund Talk \| Mutual Funds FAQs \| Personal Finance FAQs ] -------------------------------------------------------------------------------- Monday March 27, 11:51 am Eastern Time worldlyinvestor.com Sector of the Day Technology Davids Will Slay Legacy Telecom Goliaths By David H.M. Baker, Columnist Telecom upstarts will eventually overcome the established phone companies. Here's how to play it. Just as technology can be a boon to the provider, it can be a serious threat to companies that fail to recognize the shifting landscape and embrace it. Nowhere is this more obvious than in the telecommunications sector. The issue here is really the pace of change. Today more than ever, companies have a very small window to make critical decisions that can make or break them; the timeline from concept to marketable product or service has been compressed from years to months. The long-distance players and satellite firms all are in a very tenuous situation, and I would be extremely careful about putting new money into these sectors. The problem is that these players are victims of the emerging technology trends. Free Voice Voice telecommunication ultimately is going to be free. Voice service will eventually be a loss leader for other services offered by these companies over their networks. This is a huge problem for the three leading long-distance companies AT&T (NYSE:T - news), Sprint (NYSE:FON - news) and MCI Worldcom (Nasdaq:WCOM - news), for whom consumer voice service is still a huge portion of revenues. Upstarts like Net2Phone (Nasdaq:NTOP - news), iBasis (Nasdaq:IBAS - news) and NetworkPlus (Nasdaq:NPLS - news) are embracing new technologies that will take advantage of the shifting paradigm and leave behind the larger, slow-moving players. I think this is going to be a huge issue especially as voice-over-IP gets more traction in the marketplace. This will put considerable pressure on the incumbents' share prices once this issue gains sufficient attention. In fact, I'm surprised it hasn't had more impact yet. Evidence of price pressure is clear in the recent offers of 5- cent-per-minute long distance service, which we will see quickly dropping to zero. The other issue here is that the incumbents' long-haul networks are considerably older and inferior to other emerging players like Level 3 (Nasdaq:LVLT - news), Global Crossing (Nasdaq:GBLX - news) or Qwest (NYSE:Q - news). This is a huge disadvantage, as the incumbents must pay to use the newer networks to remain competitive. Making the Call My advice here is to sell AT&T and therefore one would feel much more comfortable owning the tracking stocks of the cable and wireless units, which are planned for floatation. MCI WorldCom will make the transition, though not without pain. I would be a buyer on any pullbacks of 30%. My favorite of the new players is Global Crossing. I would buy half a position here, and then buy Qwest below $42. In even worse shape than the long-distance companies are the regional Bell operating companies, or RBOCs. Instead of embracing new technologies, the RBOCs have chosen instead to use their vast legal resources to slow down the onslaught of competitors, and use their control of the network to make it very difficult for others to provide services to their customers. All this has done is to slow down what should have been a more rapid adoption of these new services. The RBOC's are getting it from all sides and they are going to be crushed by the wave of new competitors armed with the latest technology, non-unionized workforces, lean operating structures and superior service offerings. Cable Connection The threat is coming from the cable providers, competitive local exchange carriers (CLECs) and wireless providers, each of which are well positioned to take a chunk out of the RBOCs' hide. Cable companies like Comcast (Nasdaq:CMCSK - news) and Cox (NYSE:COX - news) are already making serious headway in the broadband sector and will ultimately offer customers a very attractive bundled telecom service. Meanwhile, an array of wireless providers like Sprint PCS (NYSE:PCS - news) and Vodafone Airtouch (NYSE:VOD - news) are leading the charge in the wireless space. With the next-generation 3G wireless phones, they'll also become a real threat to the landline telecom players by offering an alternative to the RBOC's networks. The CLECs like ICG Communications (Nasdaq:ICGX - news) and McLeodUSA (Nasdaq:MCLD - news) have already siphoned off the business from many of RBOC's more lucrative business customers with through offering superior services at better prices. I would not own any of the RBOC's as I think their only shot is to try and buy their way into the game with their lackluster stock. This would be a smart move if they can pull it off, but absent that they are all sells across the board. I like ICGX and own it in my client accounts, and I also own CMCSK and feel it is a bargain at current levels. In my next several columns I'll take a look at some other sectors that are going to be swamped by the technology tsunami, and point to other companies that will go under if they don't move more quickly. David H.M. Baker CFA is an analyst for worldlyinvestor.com and president of Rivendell Capital Management, a private-client money management firm, and a partner in Vision Investors LP, a Boston-based hedge fund. His column covers stocks that he feels are undervalued relative to their peers. Clients of Rivendell Capital Management own positions in ICG Communications, Comcast, MCI Worldcom, Sprint PCS, Network Plus and Global Crossing. Go to www.worldlyinvestor.

To: JDN who wrote (6039)	3/28/2000 1:29:00 AM
From: Tejman	Read Replies (1) \| Respond to of 11568

JND, It helps to hear that I am not alone stuck with these stocks.. but you know the worst!! for which I am still kicking myself is that I had AMAT (Bought $27), Intel (Bought $83 before last split), COMS (Bought $22). Last year in Nov I sold all of these with a good profit to enter WCOM, CPQ, PFE & BMY. AMAT,INTC & CPQ all have more than doubled from the price where I sold them but WCOM & CPQ have hardly moved and PFE & BMY have fallen slightly. So at times I am frustrated with these stocks and have limited choices right now..other than hold on..